BILL NUMBER: SB 94	CHAPTERED  10/10/99

	CHAPTER   931
	FILED WITH SECRETARY OF STATE   OCTOBER 10, 1999
	APPROVED BY GOVERNOR   OCTOBER 10, 1999
	PASSED THE SENATE   SEPTEMBER 9, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 7, 1999
	AMENDED IN ASSEMBLY   SEPTEMBER 2, 1999
	AMENDED IN ASSEMBLY   AUGUST 16, 1999
	AMENDED IN ASSEMBLY   JULY 1, 1999
	AMENDED IN SENATE   MAY 12, 1999
	AMENDED IN SENATE   APRIL 20, 1999
	AMENDED IN SENATE   APRIL 12, 1999

INTRODUCED BY   Senator Chesbro

                        DECEMBER 7, 1998

   An act to amend Sections 17053.5, 18533, 18534, 18624, 19008,
19034, 19041, 19045, 19064, 19067, 19084, 19109, 19323, 19504, 19705,
19717, 21013, and 21016 of, to add Sections 17085.7, 18673, 19116,
19117, 19187, 19226, 19236, 19443, 19504.5, 19504.7, 19542.3, and
19546.5 to, and to repeal Section 19052 of, the Revenue and Taxation
Code, relating to taxation, to take effect immediately, tax levy.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 94, Chesbro.  Income and bank and corporation taxes:  IRS
restructuring and reform.
   The Personal Income Tax Law and the Bank and Corporation Tax Law
impose taxes on income and, among other things, provide for specified
conformity to federal income tax laws.  In this connection, the
federal Internal Revenue Service Restructuring and Reform Act of 1998
provides for, among other things, changes to the way the Internal
Revenue Service (IRS) is organized, additional taxpayer rights,
including a shifting of the burden of proof, and changes to the rules
as to how taxes are computed.
   This bill would provide for specified conformity to that federal
act with respect to awarding costs and fees, liens, suspension of
interest, penalties, notices, abatement of interest, collections,
financial status audits, trade secrets (including a criminal penalty
for divulging or making known software), motion to quash, levies,
assessments, waivers, seizure of property, installment agreements,
explanation of disallowance, whistle-blower disclosure,
identification of return preparer, innocent spouse rules, and
correction to rules relating to the proration of the exclusion in the
case where a taxpayer does not meet the ownership and use
requirements pertaining to a sale of his or her principal residence.
This bill would also provide the Franchise Tax Board with the
authority to compromise a tax debt, modify rules pertaining to
taxpayer tax credit and employer deficiency assessments for the
issuance of an earnings withholding order for taxes, and modify or
clarify specified operative date language.  By creating a new crime,
this bill would impose a state-mandated local program.
  The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   This bill would incorporate certain changes to laws proposed by
both this bill and SB 299 if this bill and SB 299 are enacted and
become effective, as provided.
   This bill would take effect immediately as a tax levy.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  This act shall be known and may be cited as the
"Taxpayer's Bill of Rights Act of 1999."
  SEC. 3.  Section 17053.5 of the Revenue and Taxation Code is
amended to read:
   17053.5.  (a) (1) For a qualified renter, there shall be allowed a
credit against his or her "net tax"(as defined in Section 17039).
The amount of the credit shall be as follows:
   (A) For married couples filing joint returns, heads of household
and surviving spouses (as defined in Section 17046) the credit shall
be equal to one hundred twenty dollars ($120) if adjusted gross
income is fifty thousand dollars ($50,000) or less.
   (B) For other individuals, the credit shall be equal to sixty
dollars ($60) if adjusted gross income is twenty-five thousand
dollars ($25,000) or less.
   (2) Except as provided in subdivision (b), a husband and wife
shall receive but one credit under this section.  If the husband and
wife file separate returns, the credit may be taken by either or
equally divided between them, except as follows:
   (A) If one spouse was a resident for the entire taxable year and
the other spouse was a nonresident for part or all of the taxable
year, the resident spouse shall be allowed one-half the credit
allowed to married persons and the nonresident spouse shall be
permitted one-half the credit allowed to married persons, prorated as
provided in subdivision (e).
   (B) If both spouses were nonresidents for part of the taxable
year, the credit allowed to married persons shall be divided equally
between them subject to the proration provided in subdivision (e).
   (b) For a husband and wife, if each spouse maintained a separate
place of residence and resided in this state during the entire
taxable year, each spouse will be allowed one-half the full credit
allowed to married persons provided in subdivision (a).
   (c) For purposes of this section, a "qualified renter" means an
individual who:
   (1) Was a resident of this state, as defined in Section 17014, and

   (2) Rented and occupied premises in this state which constituted
his or her principal place of residence during at least 50 percent of
the taxable year.
   (d) The term "qualified renter" does not include any of the
following:
   (1) An individual who for more than 50 percent of the taxable year
rented and occupied premises that were exempt from property taxes,
except that an individual, otherwise qualified, is deemed a qualified
renter if he or she or his or her landlord pays possessory interest
taxes, or the owner of those premises makes payments in lieu of
property taxes that are substantially equivalent to property taxes
paid on properties of comparable market value.
   (2) An individual whose principal place of residence for more than
50 percent of the taxable year is with any other person who claimed
such individual as a dependent for income tax purposes.
   (3) An individual who has been granted or whose spouse has been
granted the homeowners' property tax exemption during the taxable
year.  This paragraph does not apply to an individual whose spouse
has been granted the homeowners' property tax exemption if each
spouse maintained a separate residence for the entire taxable year.
   (e) Any otherwise qualified renter who is a nonresident for any
portion of the taxable year shall claim the credits set forth in
subdivision (a) at the rate of one-twelfth of those credits for each
full month that individual resided within this state during the
taxable year.
   (f) Every person claiming the credit provided in this section
shall, as part of that claim, and under penalty of perjury, furnish
that information as the Franchise Tax Board prescribes on a form
supplied by the board.
   (g) The credit provided in this section shall be claimed on
returns in the form as the Franchise Tax Board may from time to time
prescribe.
   (h) For the purposes of this section, the term "premises" means a
house or a dwelling unit used to provide living accommodations in a
building or structure and the land incidental thereto, but does not
include land only, unless the dwelling unit is a mobilehome.  The
credit is not allowed for any taxable year for the rental of land
upon which a mobilehome is located if the mobilehome has been granted
a homeowners' exemption under Section 218 in that year.
   (i)  This section shall become operative on January 1, 1998, and
applies to any taxable year beginning on or after January 1, 1998.
   (j) For each taxable year beginning on or after January 1, 1999,
the Franchise Tax Board shall recompute the adjusted gross income
amounts set forth in subdivision (a).  That computation shall be made
as follows:
   (1) The California Department of Industrial Relations shall
transmit annually to the Franchise Tax Board the percentage change in
the California Consumer Price Index for all items from June of the
prior calendar year to June of the current year, no later than August
1 of the current calendar year.
   (2) The Franchise Tax Board shall compute an inflation adjustment
factor by adding 100 percent to that portion of the percentage change
figure which is furnished pursuant to paragraph (1) and dividing the
result by 100.
   (3) The Franchise Tax Board shall multiply the amount in
subparagraph (B) of paragraph (1) of subdivision (d) for the
preceding taxable year by the inflation adjustment factor determined
in paragraph (2), and round off the resulting products to the nearest
one dollar ($1).
   (4) In computing the amounts pursuant to this subdivision, the
amounts provided in subparagraph (A) of paragraph (1) of subdivision
(a) shall be twice the amount provided in subparagraph (B) of
paragraph (1) of subdivision (a).
  SEC. 4.  Section 17085.7 is added to the Revenue and Taxation Code,
to read:
   17085.7.  (a) In the case of any distribution made on account of a
notice to withhold (pursuant to Section 18670 or 18670.5) on a
qualified retirement plan, no additional tax shall be imposed in
accordance with Section 72(t) of the Internal Revenue Code.
   (b) This section shall apply to distributions after December 31,
1999.
  SEC. 5.  Section 18533 of the Revenue and Taxation Code is amended
to read:
   18533.  (a) (1) Notwithstanding subdivision (a) and the first
sentence of subdivision (b) of Section 19006:
   (A) An individual who has made a joint return may elect to seek
relief under the procedures prescribed under subdivision (b), and
   (B) If the individual is eligible to elect the application of
subdivision (c), the individual may, in addition to any election
under subparagraph (A), elect to limit the individual's liability for
any deficiency with respect to the joint return in the manner
prescribed under subdivision (c).
   (2) Any determination under this section shall be made without
regard to community property laws.
   (b) (1) Under procedures prescribed by the Franchise Tax Board,
if--               (A) A joint return has been made under this
chapter for a taxable year,               (B) On that return there is
an understatement of tax attributable to erroneous items of one
individual filing the joint return,               (C) The other
individual filing the joint return establishes that in signing the
return he or she did not know of, and had no reason to know of, that
understatement,               (D) Taking into account all facts and
circumstances, it is inequitable to hold the other  individual liable
for the deficiency in tax for that taxable year attributable to that
understatement, and               (E) The other individual elects
(in the form and manner as the Franchise Tax Board may prescribe) the
benefits of this subdivision not later than the date that is two
years after the date the Franchise Tax Board has begun collection
activities with respect to the individual making the election, then
the other individual shall be relieved of liability for tax
(including interest, penalties, and other amounts) for that taxable
year to the extent that the liability is attributable to that
understatement.
   (2) If an individual who, but for subparagraph (C) of paragraph
(1), would be relieved of liability under paragraph (1), establishes
that in signing the return the individual did not know, and had no
reason to know, the extent of the understatement, then the individual
shall be relieved of liability for tax (including interest,
penalties, and other amounts) for that taxable year to the extent
that the liability is attributable to the portion of the
understatement of which that individual did not know and had no
reason to know.
   (3) For purposes of this subdivision, the term "understatement"
has the meaning given to that term by Section 6662(d)(2)(A) of the
Internal Revenue Code.
   (c) (1) Except as provided in this subdivision, if an individual
who has made a joint return for any taxable year elects the
application of this subdivision, the individual's liability for any
deficiency which is assessed with respect to the return shall not
exceed the portion of the deficiency properly allocable to the
individual under subdivision (d).
   (2) Except as provided in clause (ii) of subparagraph (A) of
paragraph (3) or subparagraph (C) of paragraph (3), each individual
who elects the application of this subdivision shall have the burden
of proof with respect to establishing the portion of any deficiency
allocable to that individual.
   (3) (A) (i) An individual shall only be eligible to elect the
application of this subdivision if--
   (I) At the time the election is filed, that individual is no
longer married to, or is legally separated from, the individual with
whom that individual filed the joint return to which the election
relates, or
   (II) That individual was not a member of the same household as the
individual with whom the joint return was filed at any time during
the 12-month period ending on the date the election is filed.
   (ii) If the Franchise Tax Board demonstrates that assets were
transferred between individuals filing a joint return as part of a
fraudulent scheme by those individuals, an election under this
subdivision by either individual shall be invalid (and subdivision
(a) and the first sentence of subdivision (b) of Section 19006 shall
apply to the joint return).
   (B) An election under this subdivision for any taxable year shall
be made not later than two years after the date on which the
Franchise Tax Board has begun collection activities with respect to
the individual making the election.
   (C) If the Franchise Tax Board demonstrates that an individual
making an election under this subdivision had actual knowledge, at
the time the individual signed the return, of any item giving rise to
a deficiency (or portion thereof) which is not allocable to the
individual under subdivision (d), that election shall not apply to
that deficiency (or portion).  This subparagraph shall not apply
where the individual with actual knowledge establishes that the
individual signed the return under duress.
   (4) (A) Notwithstanding any other provision of this subdivision,
the portion of the deficiency for which the individual electing the
application of this subdivision is liable (without regard to this
paragraph) shall be increased by the value of any disqualified asset
transferred to the individual.
   (B) For purposes of this paragraph--
   (i) The term "disqualified asset" means any property or right to
property transferred to an individual making the election under this
subdivision with respect to a joint return by the other individual
filing the joint return if the principal purpose of the transfer was
the avoidance of tax or payment of tax.
   (ii) (I) For purposes of clause (i), except as provided in
subclause (II), any transfer that is made after the date that is one
year before the date on which the first notice of proposed assessment
under Article 3 (commencing with Section 19031) of Chapter 4 is sent
shall be presumed to have as its principal purpose the avoidance of
tax or payment of tax.
   (II) Subclause (I) shall not apply to any transfer pursuant to a
decree of divorce or separate maintenance or a written instrument
incident to that decree or to any transfer that an individual
establishes did not have as its principal purpose the avoidance of
tax or payment of tax.
   (d) For purpose of subdivision (c)--
   (1) The portion of any deficiency on a joint return allocated to
an individual shall be the amount which bears the same ratio to the
deficiency as the net amount of items taken into account in computing
the deficiency and allocable to the individual under paragraph (3)
bears to the net amount of all items taken into account in computing
the deficiency.
   (2) If a deficiency (or portion thereof) is attributable to--
   (A) The disallowance of a credit, or
   (B) Any tax (other than tax imposed by Section 17041 or 17062)
required to be included with the joint return, and the item is
allocated to one individual under paragraph (3), that deficiency (or
portion) shall be allocated to that individual.  Any item so
allocated shall not be taken into account under paragraph (1).
   (3) For purposes of this subdivision--
   (A) Except as provided in paragraphs (4) and (5), any item giving
rise to a deficiency on a joint return shall be allocated to
individuals filing the return in the same manner as it would have
been allocated if the individuals had filed separate returns for the
taxable year.
   (B) Under rules prescribed by the Franchise Tax Board, an item
otherwise allocable to an individual under subparagraph (A) shall be
allocated to the other individual filing the joint return to the
extent the item gave rise to a tax benefit on the joint return to the
other individual.
   (C) The Franchise Tax Board may provide for an allocation of any
item in a manner not prescribed by subparagraph (A) if the Franchise
Tax Board establishes that the allocation is appropriate due to fraud
of one or both individuals.
   (4) If an item of deduction or credit is disallowed in its
entirety solely because a separate return is filed, the disallowance
shall be disregarded and the item shall be computed as if a joint
return had been filed and then allocated between the spouses
appropriately.
   (5) If the liability of a child of a taxpayer is included on a
joint return, that liability shall be disregarded in computing the
separate liability of either spouse and that liability shall be
allocated appropriately between the spouses.
   (e) (1) In the case of an individual who elects to have
subdivision (b) or (c) apply--
   (A) (i) The determination of the Franchise Tax Board as to whether
the liability is to be revised as to one individual filing the joint
return shall be made not less than 30 days after notification of the
other individual filing the joint return.
   (ii) Any action taken under this section shall be treated as
though it were action on a protest taken under Section 19044 and
shall become final upon the expiration of 30 days from the date that
notice of the action is mailed to both individuals filing the joint
return, unless, within that 30-day period, the individual making the
election under subdivision (b) or (c) appeals the determination to
the board as provided in clause (iii) or the other individual filing
the joint return appeals the determination to the board as provided
in Section 19045.
   (iii) The individual making the election under subdivision (b) or
(c) may appeal the determination of the Franchise Tax Board of the
appropriate relief available to the individual under this section if
that appeal is filed during the 30-day period prescribed in clause
(ii) and the appeal shall be treated as an appeal to the board under
Section 19045.  Notwithstanding the preceding sentence, the
individual making the election under subdivision (b) or (c) may
appeal to the board at any time after the date which is six months
after the date the election is filed with the Franchise Tax Board and
before the close of the 30-day period prescribed in clause (ii).
   (B) Except as otherwise provided in Section 19081 or 19082, no
levy or proceeding in court shall be made, begun, or prosecuted
against the individual making an election under subdivision (b) or
(c) for collection of any assessment to which the election relates
until the expiration of the 30-day period described in clause (ii) of
subparagraph (A), or, if an appeal to the board has been filed under
clause (iii) or Section 19045, until the decision of the board has
become final.
   (2) The running of the period of limitations in Section 19371 on
the collection of the assessment to which the petition under
subparagraph (A) of paragraph (1) relates shall be suspended for the
period during which the Franchise Tax Board is prohibited by
subparagraph (B) of paragraph (1) from collecting by levy or a
proceeding in court and for 60 days thereafter.
   (3) (A) Except as provided in subparagraph (B), notwithstanding
any other law or rule of law (other than Article 6 (commencing with
Section 19441) of Chapter 6), a credit or refund shall be allowed or
made to the extent attributable to the application of this section.
   (B) In the case of any election under subdivision (b) or (c), if a
decision of the board in any prior proceeding for the same taxable
year has become final, that decision shall be conclusive except with
respect to the qualification of the individual for relief which was
not an issue in that proceeding.  The exception contained in the
preceding sentence shall not apply if the board determines that the
individual participated meaningfully in the prior proceeding.
   (f) Under procedures prescribed by the Franchise Tax Board, if
taking into account all the facts and circumstances, it is
inequitable to hold the individual liable for any unpaid tax or any
deficiency (or any portion of either), and relief is not available to
the individual under subdivision (b) or (c), the Franchise Tax Board
may relieve the individual of that liability.
   (g) (1) The Franchise Tax Board may prescribe regulations
providing methods for allocation of items other than the methods
under paragraph (3) of subdivision (d).
   (2) It is the intent of the Legislature that, in construing this
section and any other sections which are specifically
cross-referenced in this section, any regulations that may be
promulgated by the Secretary of the Treasury under Section 6015 of
the Internal Revenue Code, as amended by Public Law 105-206, shall
apply to the extent that those regulations do not conflict with this
section or with any regulations that may be promulgated by the
Franchise Tax Board.
   (h) (1) Except as provided in paragraph (2), the amendments made
by the act adding this subdivision shall apply to any liability for
tax arising after the effective date of the act adding this
subdivision and any liability for tax arising on or before that date
but remaining unpaid as of that date.
   (2) The four-year period under subparagraph (E) of paragraph (1)
of subdivision (b) or subparagraph (B) of paragraph (3) of
subdivision (c) shall not expire before the date which is four years
after the date of the first collection activity after the effective
date of the act adding this subdivision.
  SEC. 6.  Section 18534 of the Revenue and Taxation Code is amended
to read:
   18534.  (a) Under regulations prescribed by the Franchise Tax
Board, if:
   (1) An individual does not file a joint return for any taxable
year,
   (2) That individual does not include in gross income for that
taxable year an item of community income properly includable therein,

   (3) The individual establishes that he or she did not know of, and
had no reason to know of, that item of community income, and
   (4) Taking into account all facts and circumstances, it is
inequitable to include that item of community income in that
individual's gross income, then, for purposes of Part 10 (commencing
with Section 17001) and this part, that item of community income
shall be included in the gross income of the other spouse (and not in
the gross income of the individual).
   Under procedures prescribed by the Franchise Tax Board, if, taking
into account all the facts and circumstances, it is inequitable to
hold the individual liable for any unpaid tax or any deficiency (or
any portion of either) attributable to any item for which relief is
not available under the preceding sentence, the Franchise Tax Board
may relieve the individual of that liability.
   (b) The Franchise Tax Board may disallow the benefits of any
community property law to any taxpayer with respect to any income if
that taxpayer acted as if solely entitled to that income and failed
to notify the taxpayer's spouse before the due date (including
extensions) for filing the return for the taxable year in which the
income was derived of the nature and amount of that income.
   (c) It is the intent of the Legislature that, in construing this
section, any regulations that may be promulgated by the Secretary of
the Treasury under Section 66(c) of the Internal Revenue Code, as
amended by Public Law 105-206, shall apply to the extent that those
regulations do not conflict with this section or with any regulations
that may be promulgated by the Franchise Tax Board.
   (d) The amendments made by the act adding this subdivision shall
apply to any liability for tax arising after the effective date of
the act adding this subdivision and any liability for tax arising on
or before that date but remaining unpaid as of that date.
  SEC. 7.  Section 18624 of the Revenue and Taxation Code is amended
to read:
   18624.  (a) Section 6109 of the Internal Revenue Code, relating to
identifying numbers, shall apply, except as otherwise provided.
   (b) Identifying numbers shall be required on state tax returns,
statements, or other documents in the form and manner as the
Franchise Tax Board may require.
   (c) Section 6109(h) of the Internal Revenue Code, relating to
identifying information required with respect to certain
seller-provided financing, shall not apply.
   (d) The amendments made to Section 6109(a) of the Internal Revenue
Code, relating to identifying number of income tax return preparer,
by Public Law 105-206 shall apply.
   (e) The amendments made by the act adding this subdivision shall
be operative on the effective date of the act adding this
subdivision.
  SEC. 8.  Section 18673 is added to the Revenue and Taxation Code,
to read:
   18673.  (a) Notwithstanding Article 7 (commencing with Section
706.151) of Chapter 5 of Title 9 of Part II of the Code of Civil
Procedure, if the Franchise Tax Board determines upon receiving
information from the taxpayer that his or her employer withheld
earnings for taxes pursuant to Article 4 (commencing with Section
19251) of Chapter 5 and failed to remit the withheld earnings to the
Franchise Tax Board, the employer shall be liable for the amount not
remitted.  The Franchise Tax Board's determination shall be based on
payroll documents or other substantiating evidence furnished by the
taxpayer.
   (b) Upon its determination, the Franchise Tax Board shall mail
notice to the employer at its last known address that upon failure to
remit the withheld earnings to the Franchise Tax Board within 15
days of the date of its notice to the employer, the employer shall be
liable for that amount which was withheld and not remitted.
   (c) If the employer fails to remit the amount withheld to the
Franchise Tax Board upon notice, that amount for which the employer
is liable shall be assessed, collected, and paid as though it were a
tax deficiency.  The amount may be assessed at any time prior to
seven years from the first day that the unremitted amount, in the
aggregate, was first withheld.  Interest shall accrue on that amount
from the first day that the unremitted amount, in the aggregate, was
first withheld.
   (d) When the assessment against the employer is final and due and
payable, the taxpayer's account shall be immediately credited with an
amount equal to that assessed amount as though it were a payment
received by the Franchise Tax Board on the first date that the
unremitted amount, in the aggregate, was first withheld by the
employer.
   (e) Collection against the taxpayer is stayed for both the
following amount and period:
   (1) An amount equal to the amount determined by the Franchise Tax
Board under subdivision (a).
   (2) The earlier of the time the credit is applied to the taxpayer'
s account pursuant to subdivision (d) or the assessment against the
employer is withdrawn or revised and the taxpayer is notified by the
Franchise Tax Board thereof.
   (f) If under this section an amount that was withheld and not
remitted to the Franchise Tax Board is final and due and payable by
the employer and credited to the taxpayer's account, this remedy
shall be the exclusive remedy for the taxpayer to recover that amount
from the employer.
   (g) This section shall not apply to debts, obligations, or other
amounts for which an earnings withholding order or assignment is
issued by the Franchise Tax Board pursuant to Article 5, 5.5, or 6 of
Chapter 5 or Section 10878.
   (h) This section shall apply to determinations made by the
Franchise Tax Board on or after the effective date of the act adding
this section.
  SEC. 9.  Section 19008 of the Revenue and Taxation Code is amended
to read:
   19008.  (a) The Franchise Tax Board may, in cases of financial
hardship, as determined by the Franchise Tax Board, allow an
individual or fiduciary to enter into installment payment agreements
with the Franchise Tax Board to pay taxes due, plus applicable
interest and penalties over the life of the installment period.
Failure by an individual or fiduciary to comply fully with the terms
of the installment payment agreement shall render the agreement null
and void, unless the Franchise Tax Board determines that the failure
was due to a reasonable cause, and the total amount of tax, interest,
and all penalties shall be immediately due and payable.
   (b) In the case of a liability for tax of an individual under Part
10 (commencing with Section 17001) or this part, the Franchise Tax
Board shall enter into an agreement to accept the payment of the tax
in installments if, as of the date the individual offers to enter
into the agreement,  all of the following apply:
   (1) The aggregate amount of the liability (determined without
regard to interest, penalties, additions to the tax and additional
amounts) does not exceed ten thousand dollars ($10,000).
   (2) The taxpayer (and, if the liability relates to a joint return,
the taxpayer's spouse) has not during any of the preceding five
taxable years done any of the following:

      (A) Failed to file any return of tax imposed under Part 10
(commencing with Section 17001) or this part.
   (B) Failed to pay any tax required to be shown on the return.
   (C) Entered into an installment agreement under this section for
payment of any tax imposed by Part 10 (commencing with Section 17001)
or this part.
   (3) The Franchise Tax Board determines that the taxpayer is
financially unable to pay the liability in full when due (and the
taxpayer submits any information as the Franchise Tax Board may
require to make this determination).
   (4) The agreement requires full payment of the liability within
three years.
   (5) The taxpayer agrees to comply with the provisions of this part
and Part 10 (commencing with Section 17001) for the period the
agreement is in effect.
   (c) Except in any case where the Franchise Tax Board finds
collection of the tax to which an installment payment agreement
relates to be in jeopardy, or there is a mutual consent to terminate,
alter, or modify the agreement, the agreement shall not be
considered null and void, or otherwise terminated, unless both of the
following occur:
   (1) A notice of termination is provided to the individual or
fiduciary not later than 30 days before the date of termination.
   (2) The notice includes an explanation of why the Franchise Tax
Board intends to terminate the agreement.
   (d) No levy may be issued on the property or rights to property of
any person with respect to any unpaid tax:
   (1) During the period that an offer by the taxpayer for an
installment agreement under this section for payment of the unpaid
tax is pending with the Franchise Tax Board.
   (2) If the offer is rejected by the Franchise Tax Board, during
the 30 days thereafter (and, if a request for review of the rejection
is filed within the 30 days, during the period that the review is
pending).
   (3) During the period that the installment agreement for payment
of the unpaid tax is in effect.
   (4) If the agreement is terminated by the Franchise Tax Board,
during the 30 days thereafter (and, if a request for review of the
termination is filed within the 30 days, during the period that the
review is pending).
   (5) This subdivision shall not apply with respect to any of the
following:
   (A) Any unpaid tax if either of the following occurs:
   (i) The taxpayer files a written notice with the Franchise Tax
Board that waives the restriction imposed by this subdivision on levy
with respect to the tax.
   (ii) The Franchise Tax Board finds that the collection of that tax
is in jeopardy.
   (B) Any levy that was first issued before the date that the
applicable proceeding under this subdivision commenced.
   (C) At the discretion of the Franchise Tax Board, any unpaid tax
for which the taxpayer makes an offer of an installment agreement
subsequent to a rejection of an offer of an installment agreement
with respect to that unpaid tax (or to any review thereof).
   (D) The period of limitation under Section 19371 shall be
suspended for the period during which the Franchise Tax Board is
prohibited under this subdivision from making a levy.
   (e) The Taxpayers' Rights Advocate shall establish procedures for
an independent departmental administrative review for the rejection
of the offer of an installment payment and for installment payment
agreements that are rendered null and void, or otherwise terminated
under this section, for individuals or fiduciaries who request that
review.  This administrative review shall not be subject to Chapter
4.5 (commencing with Section 11400) of Part 1 of Division 3 of the
Government Code.  Unless review is requested by the taxpayer within
30 days of the date of rejection of the offer of an installment
agreement or termination of the installment agreement, this
administrative review shall not stay collection of the tax to which
the installment payment agreement relates.
   (f) The amendments made by the act adding this subdivision are
operative on the effective date of that act, except subdivision (d)
shall be operative for any proposed installment agreement submitted
after December 31, 2000.
  SEC. 10.  Section 19034 of the Revenue and Taxation Code is amended
to read:
   19034.  (a) Each notice shall set forth the reasons for the
proposed deficiency assessment and the computation thereof.
   (b) Each notice shall include the date determined by the Franchise
Tax Board as the last day on which the taxpayer may file a written
protest pursuant to Section 19041.  Failure to include this date
shall not invalidate a notice that is otherwise valid.
   (c) The amendments made by the act adding this subdivision shall
apply to any notice mailed after December 31, 1999.
  SEC. 11.  Section 19041 of the Revenue and Taxation Code is amended
to read:
   19041.  (a) Within 60 days after the mailing of each notice of
proposed deficiency assessment the taxpayer may file with the
Franchise Tax Board a written protest against the proposed deficiency
assessment, specifying in the protest the grounds upon which it is
based.
   (b) Any protest filed with the Franchise Tax Board on or before
the last date specified for filing that protest by the Franchise Tax
Board in the notice of proposed deficiency assessment (according to
Section 19034) shall be treated as timely filed.
   (c) The amendments made by the act adding this subdivision shall
apply to any notice mailed after December 31, 1999.
  SEC. 12.  Section 19045 of the Revenue and Taxation Code is amended
to read:
   19045.  (a) The Franchise Tax Board's action upon the protest,
whether in whole or in part, is final upon the expiration of 30 days
from the date when it mails notice of its action to the taxpayer,
unless within that 30-day period the taxpayer appeals in writing from
the action of the Franchise Tax Board to the board.
   (b) (1) The Franchise Tax Board's notice of action upon protest
shall include the date determined by the Franchise Tax Board as the
last day on which the taxpayer may file an appeal with the board.
   (2) Any appeal to the board filed by the taxpayer on or before the
date for filing an appeal specified in the notice (pursuant to
paragraph (1)) shall be treated as timely filed.
   (c) This section shall apply to any notice mailed after December
31, 1999.
  SEC. 13.  Section 19052 of the Revenue and Taxation Code is
repealed.
  SEC. 14.  Section 19064 of the Revenue and Taxation Code is amended
to read:
   19064.  (a) If any person initiates a motion to quash a subpoena,
as provided by Sections 7465 to 7476, inclusive, of the Government
Code, and that person is the person with respect to whose liability
the subpoena is issued (or is the agent, nominee, or other person
acting under the direction or control of that person), then the
running of any period of limitations under Section 19057 (relating to
deficiency assessments), Section 19087 (relating to false or
fraudulent returns), or Section 19704 (relating to criminal
prosecutions) with respect to that person shall be suspended for the
period during which a proceeding, and appeals therein, with respect
to the enforcement of the subpoena is pending.
   (b) In the absence of the resolution of the subpoenaed person's
response to a subpoena issued under Section 19504 (power of
examination), the running of any period of limitations under Section
19057 (relating to deficiency assessments), Section 19087 (relating
to false or fraudulent returns), or Section 19704 (relating to
criminal prosecutions) with respect to any person whose liability the
subpoena was issued (other than a person taking action as provided
by subdivision (a)) shall be suspended for the period beginning on
the date which is six months after the service of the subpoena and
ending with the final resolution of that response.
   (c) The amendments made by the act adding this subdivision are
operative for any subpoena served after the effective date of the act
adding this subdivision.
  SEC. 15.  Section 19067 of the Revenue and Taxation Code is amended
to read:
   19067.  (a) Where before the expiration of the time prescribed for
the mailing of a notice of a proposed deficiency assessment, the
taxpayer consents in writing to an assessment after that time, the
assessment may be made at any time prior to the expiration of the
period agreed upon.  The period agreed upon may be extended by
subsequent agreements in writing made before the expiration of the
period previously agreed upon.
   (b) The Franchise Tax Board shall notify the taxpayer of the
taxpayer's right to refuse to extend the expiration of the time
prescribed for the mailing of a notice of a proposed deficiency
assessment, or to limit that extension to a particular period of
time, on each occasion when the taxpayer is requested to provide the
taxpayer's consent.
   (c) The amendments made by the act adding this subdivision shall
apply to any request to extend the expiration of the time prescribed
for the mailing of a notice of a proposed deficiency assessment made
after December 31, 2000.
  SEC. 16.  Section 19084 of the Revenue and Taxation Code is amended
to read:
   19084.  (a) (1) (A) Unless the Chief Counsel of the Franchise Tax
Board (or the chief counsel's delegate) personally approves (in
writing) the assessment or levy, no assessment shall be made under
this article and no levy shall be issued less than 30 days after
either of the following:
   (i) A notice and demand is mailed or issued for payment pursuant
to Section 19081.
   (ii) Notice and demand for a return and payment is mailed or
issued pursuant to Section 19082.
   (B) Within five days after the day on which either a notice and
demand for payment is mailed or issued pursuant to Section 19081, or
notice and demand for a return and payment is mailed or issued
pursuant to Section 19082, the Franchise Tax Board shall mail or
issue the taxpayer a written statement of the information upon which
the Franchise Tax Board relies in issuing that notice and demand.
   (2) Within 30 days after the day on which the taxpayer is
furnished the written statement described in paragraph (1), or within
30 days after the last day of the period within which the statement
is required to be furnished, the taxpayer may petition the Franchise
Tax Board to review whether its finding pursuant to Section 19081 or
19082 is reasonable under the circumstances, specifying the grounds
on which the petition is based.  The filing of a petition for review
shall not operate to stay collection.  Collection may be stayed only
as provided in Section 19083.  A petition filed pursuant to this
paragraph shall also be considered a protest filed pursuant to
Section 19041 against the proposed additional tax.
   (3) If a petition for review under paragraph (2) is not made
within the 30-day period set forth in that paragraph, the finding of
the Franchise Tax Board pursuant to Section 19081 or 19082 is final.

   (4) After a petition for review is filed under paragraph (2), the
Franchise Tax Board shall determine whether or not the issuance of
notice and demand under Section 19081 or 19082 is reasonable under
the circumstances.  In making this determination, the Franchise Tax
Board shall grant the taxpayer or authorized representative an oral
hearing if the taxpayer has so requested in the petition.  Chapter
4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title
2 of the Government Code does not apply to a hearing under this
paragraph.  The burden of proof with respect to whether a jeopardy
exists as to collection or an assessment is upon the Franchise Tax
Board.
   (5) The Franchise Tax Board shall make the determination under
paragraph (4) within 90 days of the filing of the petition for review
unless the taxpayer requests, in writing, additional time.
   (6) In making the determination required by paragraph (4), the
Franchise Tax Board shall consider all relevant factors, including,
but not limited to, the likelihood that collection will be
jeopardized, the assets of the taxpayer, and the amount of the
assessment as it relates to whether jeopardy status exists.  The
burden of proof as to the amount of the assessment for purposes of
determining jeopardy status is upon the taxpayer.
   (b) (1) Within 60 days after the earlier of the following days,
the taxpayer may appeal the determination to the State Board of
Equalization in the manner provided in Section 19085:
   (A) The day the Franchise Tax Board notifies the taxpayer of the
determination described in paragraph (4) of subdivision (a).
   (B) One day after the time period prescribed by paragraph (5) of
subdivision (a) for the Franchise Tax Board to make its
determination.
   (2) If an appeal is not filed before the expiration of the time
periods, the Franchise Tax Board's determination is final.  Filing of
an appeal shall not operate to stay collection.  Collection may be
stayed only as provided in Section 19083.
   (3) Within 60 days after an appeal is filed under paragraph (1),
the board shall determine whether the issuance of notice and demand
under Section 19081 or 19082 is reasonable under the circumstances.
The burden of proof with respect to whether a jeopardy exists as to
collection or an assessment is upon the Franchise Tax Board.
   (4) If the board determines that a jeopardy status does not apply
to all or part of the assessment, the board may modify the amount of
the assessment to which the jeopardy attaches.  If the board does not
act within the time period provided in paragraph (3) as modified by
paragraph (6), the board will be deemed to have denied the taxpayer's
appeal.
   (5) In making the determination required by paragraph (3), the
board shall consider all relevant factors, including, but not limited
to, the likelihood that collection will be jeopardized, the assets
of the taxpayer, and the amount of the assessment as it relates to
whether jeopardy status exists.  The burden of proof as to the amount
of the assessment for purposes of determining jeopardy status is
upon the taxpayer.
   (6) If either party requests an extension of the 60-day period set
forth in paragraph (3) and establishes reasonable grounds why the
extension should be granted, the board may grant an extension of not
more than 30 additional days.
   (c) (1) Within 60 days after the earlier of the following days,
either party may bring a civil action against the other in superior
court for a judicial determination as to whether or not the issuance
of the notice and demand under Section 19081 or 19082 is reasonable
under the circumstances:
   (A) The day the board notifies the taxpayer of its determination
described in paragraph (3), as modified by paragraph (6), of
subdivision (b).
   (B) If the board fails to make a timely determination, then one
day after the time prescribed for the board to make its
determination.
   (2) If a civil action under this subdivision is not commenced
within the 60-day period set forth in paragraph (1), the board's
determination is final.  The filing of the civil action shall not
operate to stay collection.  Collection shall be stayed only as
provided by Section 19083.
   (3) Within 60 days after proper service is made, the superior
court shall determine whether the issuance of notice and demand under
Section 19081 or 19082 is reasonable under the circumstances.  The
burden of proof with respect to whether a jeopardy exists as to
collection or an assessment is upon the Franchise Tax Board.
   (4) If the court determines that a jeopardy status does not apply
to all or part of the assessment, the court may modify the amount of
the assessment to which the jeopardy attaches.
   (5) In making the determination required by paragraph (3), the
superior court shall consider all relevant factors, including, but
not limited to, the likelihood that collection will be jeopardized,
the assets of the taxpayer, and the amount of the assessment as it
relates to whether jeopardy status exists.  The burden of proof as to
the amount of the assessment for purposes of determining jeopardy
status is upon the taxpayer.
   (6) If either party in the action requests an extension of the
60-day period set forth in paragraph (3) of subdivision (c) and
establishes reasonable grounds why the extension should be granted,
the superior court may grant an extension of not more than 30
additional days.
   (7) Actions filed pursuant to this section shall be filed in the
Superior Court of the County of Los Angeles, the City and County of
San Francisco, the County of San Diego, or the County of Sacramento.
Sections 19387 and 19389 shall apply to those actions.
   (8) The determination made by a superior court under this section
shall be final and conclusive and shall not be reviewed by any other
court.
   (d) The amendments made by the act adding this subdivision are
operative for taxes assessed and levies made after the effective date
of the act adding this subdivision.
  SEC. 17.  Section 19109 of the Revenue and Taxation Code is amended
to read:
   19109.  (a) If the Franchise Tax Board extends for any period the
time for filing a return under Section 18572 or subdivision (a) of
Section 18567 and the time for paying the tax under Section 18572 or
subdivision (c) of Section 18567 (and waives any penalties relating
to the failure to so file or so pay) for any individual located in a
presidentially declared disaster area or any county or city in this
state which is proclaimed by the Governor to be in a state of
disaster who incurred a loss, the Franchise Tax Board shall,
notwithstanding subdivision (b) of Section 18572, abate for that
period the assessment of any interest prescribed under this article
on that tax.
   (b) For purposes of subdivision (a), the term "presidentially
declared disaster area" means, with respect to any individual, any
area which the President has determined warrants assistance by the
federal government under the Disaster Relief and Emergency Assistance
Act.
   (c) For purposes of this section, the term "individual" shall not
include any estate or trust.
   (d) This section shall apply to disasters declared after December
31, 1997, with respect to taxable years beginning after December 31,
1997.
  SEC. 18.  Section 19116 is added to the Revenue and Taxation Code,
to read:
   19116.  (a) In the case of an individual who files a return of tax
imposed under Part 10 (commencing with Section 17001) for a taxable
year on or before the due date for the return, including extensions,
if the Franchise Tax Board does not provide a notice to the taxpayer
specifically stating the taxpayer's liability and the basis of the
liability before the close of the notification period, the Franchise
Tax Board shall suspend the imposition of any interest, penalty,
addition to tax, or additional amount with respect to any failure
relating to the return which is computed by reference to the period
of time the failure continues to exist and which is properly
allocable to the suspension period.
   (b) For purposes of this section:
   (1) Except as provided in subdivision (e), "notification period"
means the 18-month period beginning on the later of either of the
following:
   (A) The date on which the return is filed.
   (B) The due date of the return without regard to extensions.
   (2) "Suspension period" means the period beginning on the day
after the close of the notification period and ending on the date
which is 15 days after the date on which notice described in
subdivision (a) is provided by the Franchise Tax Board.
   (c) This section shall be applied separately with respect to each
item or adjustment.
   (d) This section shall not apply to any of the following:
   (1) Any penalty imposed by Section 19131.
   (2) Any penalty imposed by Section 19132.
   (3) Any interest, penalty, addition to tax, or additional amount
involving fraud.
   (4) Any interest, penalty, addition to tax, or additional amount
with respect to any tax liability shown on the return.
   (5) Any criminal penalty.
   (e) For taxpayers required by subdivision (a) of Section 18622 to
report a change or correction by the Commissioner of Internal Revenue
or other officer of the United States or other competent authority
the following rules shall apply:
   (1) The notification period under subdivision (a) shall be either
of the following:
   (A) One year from the date the notice required by Section 18622 is
filed with the Franchise Tax Board by the taxpayer or the Internal
Revenue Service, if the taxpayer or the Internal Revenue Service
reports that change or correction within six months after the final
federal determination.
   (B) Two years from the date when the notice required by Section
18622 is filed with the Franchise Tax Board by the taxpayer or the
Internal Revenue Service, if after the six-month period required in
Section 18622, a taxpayer or the Internal Revenue Service reports a
change or correction.
   (2) The suspension period under subdivision (a) shall mean the
period beginning on the day after the close of the notification
period under paragraph (1) and ending on the date which is 15 days
after the date on which notice described in subdivision (a) is
provided by the Franchise Tax Board.
   (f) This section shall apply to taxable years ending after the
effective date of the act adding this section.
  SEC. 19.  Section 19117 is added to the Revenue and Taxation Code,
to read:
   19117.  (a) The Franchise Tax Board shall include with each notice
to an individual taxpayer which includes an amount of interest
required to be paid by the taxpayer under this part information with
respect to the section under which interest is imposed and a
description of how the interest is computed.  Upon the request of the
taxpayer, the Franchise Tax Board shall also provide a computation
of the interest.
   (b) This section shall apply to any notice issued after December
31, 2001.
  SEC. 20.  Section 19187 is added to the Revenue and Taxation Code,
to read:
   19187.  (a) The Franchise Tax Board shall include with each notice
imposing a penalty under this part information that contains the
name of the penalty, the section of this part under which the penalty
is imposed, and a description of the computation of the penalty.
Upon the request of the taxpayer, the Franchise Tax Board shall also
provide a computation of the penalty imposed.
   (b) (1) No penalty under this part shall be imposed unless the
initial determination of the imposition of the penalty is personally
approved in writing by the immediate supervisor of the individual
making that determination or a higher level official as designated by
the executive officer, or his or her delegee.
   (2) Paragraph (1) shall not apply to any of the following:
   (A) Any addition to tax under Sections 19131, 19132, 19136, or
19142.
   (B) Any other penalty automatically calculated through electronic
means.
   (C) Any penalty resulting from a change or correction by the
Commissioner of Internal Revenue or other officer of the United
States or other competent authority required to be reported under
subdivision (a) of Section 18622.
   (c) For purposes of this section, "penalty" includes any addition
to tax or any additional amount.
   (d) This section shall apply to notices issued and penalties
imposed after December 31, 2001.
  SEC. 21.  Section 19226 is added to the Revenue and Taxation Code,
to read:
   19226.  (a) At the request of the owner whose property is subject
to any lien under Section 19221, the Franchise Tax Board shall issue
a release of lien from that property if the owner is not the person
whose unsatisfied liability gave rise to the lien and the owner does
either of the following:
   (1) Deposits with the Franchise Tax Board an amount of money equal
to the value of the interest of the state (as determined by the
Franchise Tax Board) in the property.
   (2) Furnishes a bond acceptable to the Franchise Tax Board in a
like amount.
   (b) The Franchise Tax Board shall refund the amount so deposited,
pay interest at the overpayment rate under Section 19521, and release
the bond, to the extent the Franchise Tax Board determines that
either of the following apply:
   (1) The unsatisfied liability giving rise to the lien can be
satisfied from a source other than the property for which the deposit
or bond is made.
   (2) The value of the interest of the state in the property is less
than the Franchise Tax Board's prior determination of the value.
   (c) If no request is made under subdivision (d), within the period
prescribed, the Franchise Tax Board shall do both of the following
within 60 days after the expiration of the period:
   (1) Apply the amount deposited or collected on the bond, to the
extent necessary to satisfy the unsatisfied liability secured by the
lien.
   (2) Refund (with interest at the overpayment rate under Section
19521) any portion of the amount deposited which is not used to
satisfy the liability.
   (d) If a release is issued pursuant to this section, the owner
may, within 60 days after the day on which the release is issued,
request the Franchise Tax Board as provided under subdivision (f) to
determine whether the value of the interest of the state (if any) is
less than the Franchise Tax Board's prior determination of the value.
  No other action may be brought by the owner for a determination.
   (e) This section shall not limit the circumstances in which the
Franchise Tax Board may release a lien under any circumstances to
facilitate the collection of the tax liability or, if that release is
in the best interest of the taxpayer and the state, take any action
associated with the release of that lien it deems appropriate.
   (f) The Taxpayers' Rights Advocate shall establish procedures for
an independent departmental administrative review for requests made
under subdivision (d).  This administrative review shall not be
subject to Chapter 4.5 (commencing with Section 11400) of Part 1 of
Division 3 of the Government Code.  If the administrative review
determines that the Franchise Tax Board's previous determination of
the value of the interest of the state in the property for purposes
of this section exceeds the actual value of the state's interest, the
board shall provide a refund of the amount deposited and a release
of the bond, to the extent that the aggregate of the amounts thereof
exceeds the value so determined.  In the case of a refund issued
pursuant to this subdivision, interest shall be allowed at the rate
prescribed for overpayments from the date the Franchise Tax Board
receives the amount to the date of refund.
                                                 (g) This section
shall be operative on the effective date of the act adding this
section.
  SEC. 22.  Section 19236 is added to the Revenue and Taxation Code,
to read:
   19236.  For purposes of issuing a warrant pursuant to this
article:
   (a) (1) No levy may be issued on any property or right to property
to be sold in accordance with the Code of Civil Procedure until a
thorough investigation of the status of the property has been
completed by the Franchise Tax Board.
   (2) For purposes of paragraph (1), an investigation of the status
of any property shall include all of the following:
   (A) A verification of the taxpayer's liability.
   (B) The completion of an analysis to determine whether the expense
of the sale process to the state exceeds the liability for which the
levy would be issued.
   (C) The determination that the equity in the property is
sufficient to yield net proceeds from the sale of the property to
apply to the liability.
   (D) A thorough consideration of alternative collection methods.
   (b) If the amount of the levy does not exceed five thousand
dollars ($5,000), no levy may be issued on either of the following:
   (1) Any real property used as a residence by the taxpayer.
   (2) Any real property of the taxpayer (other than real property
which is rented) used by any other individual as a residence.
   (c) Notwithstanding the investigation required under subdivision
(a):
   (1) The principal residence of the taxpayer may not be sold except
in accordance with Article 4 (commencing with Section 704.710) of
Chapter 4 of Division 2 of Title 9 of the Code of Civil Procedure,
which requires a court order for sale.
   (2) Tangible personal property or real property (other than real
property which is rented or a principal residence) used in the trade
or business of an individual taxpayer shall not be exempt from levy
unless:
   (A) The levy is approved in writing by the assistant executive
officer for collection (or delegate), or
   (B) The Franchise Tax Board finds that collection of tax is in
jeopardy.  The officer, or delegate, may not approve a levy under
subparagraph (A) unless the officer determines that the taxpayer's
other assets subject to collection are insufficient to pay the amount
due, together with expenses of the proceedings.
   (d) This section shall be operative for any warrant issued on or
after the effective date of the act adding this section.
  SEC. 24.  Section 19323 of the Revenue and Taxation Code is amended
to read:
   19323.  (a) If the Franchise Tax Board disallows any claim for
refund, it shall notify the taxpayer accordingly and provide an
explanation for the disallowance.
   (b) The amendments made by the act adding this subdivision shall
apply to disallowances after the 180th day after the effective date
of the act adding this subdivision.
  SEC. 25.  Section 19443 is added to the Revenue and Taxation Code,
to read:
   19443.  (a) (1) The executive officer and chief counsel of the
Franchise Tax Board, jointly, or their delegates, may compromise any
final tax liability in which the reduction of tax is seven thousand
five hundred dollars ($7,500) or less.
   (2) Except as provided in paragraph (3), the Franchise Tax Board,
upon recommendation by its executive officer and chief counsel,
jointly, may compromise a final tax liability involving a reduction
in tax in excess of seven thousand five hundred dollars ($7,500).
Any recommendation for approval of an offer in compromise that is not
either approved or disapproved by the Franchise Tax Board, itself,
within 45 days of the submission of the recommendation shall be
deemed approved.
   (3) The Franchise Tax Board, itself, may by resolution delegate to
the executive officer and the chief counsel, jointly, the authority
to compromise a final tax liability in which the reduction of tax is
in excess of seven thousand five hundred dollars ($7,500) but less
than ten thousand dollars ($10,000).
   (b) For purposes of this section, "a final tax liability" means
any final tax liability arising under Part 10 (commencing with
Section 17001) or Part 11 (commencing with Section 23001) or related
interest, additions to tax, penalties, or other amounts assessed
under this part.
   (c) For an amount to be compromised under this section, the
following conditions shall exist:
   (1) The taxpayer shall establish that the:
   (A) Amount offered in payment is the most that can be expected to
be paid or collected from the taxpayer's present assets or income,
and
   (B) Taxpayer does not have reasonable prospects of acquiring
increased income or assets that would enable the taxpayer to satisfy
a greater amount of the liability than the amount offered, within a
reasonable period of time.
   (2) The Franchise Tax Board shall have determined that acceptance
of the compromise is in the best interest of the state.
   (d) A determination by the Franchise Tax Board that it would not
be in the best interest of the state to accept an offer in compromise
in satisfaction of a final tax liability shall not be subject to
administrative appeal or judicial review.
   (e) When an offer in compromise is either accepted or rejected, or
the terms and conditions of a compromise agreement are fulfilled,
the Franchise Tax Board shall notify the taxpayer in writing.
   (f) In the case of a joint and several liability, the acceptance
of an offer in compromise from one liable spouse shall not relieve
the other spouse from paying the entire liability.  However, the
amount of the liability shall be reduced by the amount of the
accepted offer.
   (g) Whenever a compromise of tax or penalties or total tax and
penalties in excess of five hundred dollars ($500) is approved, there
shall be placed on file for at least one year in the office of the
executive officer of the Franchise Tax Board a public record with
respect to that compromise.  The public record shall include all of
the following information:
   (1) The name of the taxpayer.
   (2) The amount of unpaid tax, and related penalties, additions to
tax, interest, or other amounts involved.
   (3) The amount offered.
   (4) A summary of the reason why the compromise is in the best
interest of the state.
   The public record shall not include any information that relates
to any trade secret, patent, process, style of work, apparatus,
business secret, or organizational structure, that if disclosed,
would adversely affect the taxpayer or the national defense.  No list
shall be prepared and no releases distributed by the Franchise Tax
Board in connection with these statements.
   (h) Any compromise made under this section may be rescinded, all
compromised liabilities may be reestablished (without regard to any
statute of limitations that otherwise may be applicable), and no
portion of the amount offered in compromise refunded, if either of
the following occurs:
   (1) The Franchise Tax Board determines that any person did any of
the following acts regarding the making of the offer:
   (A) Concealed from the Franchise Tax Board any property belonging
to the estate of any taxpayer or other person liable for the tax;
   (B) Received, withheld, destroyed, mutilated, or falsified any
book, document, or record or made any false statement, relating to
the estate or financial condition of the taxpayer or other person
liable for the tax;
   (2) The taxpayer fails to either:
   (A) Comply with any of the terms and conditions relative to the
offer;
   (B) File subsequent required returns and pay subsequent final tax
liabilities within 20 days after the Franchise Tax Board issues
notice and demand to the person stating that the continued failure to
file or pay the tax may result in rescission of the compromise.
   (i) This section shall become operative on the effective date of
the act adding this section without regard to the taxable or income
year at issue.
  SEC. 26.  Section 19504 of the Revenue and Taxation Code is amended
to read:
   19504.  (a) The Franchise Tax Board, for the purpose of
administering its duties under this part, including ascertaining the
correctness of any return; making a return where none has been made;
determining or collecting the liability of any person in respect of
any liability imposed by Part 10 (commencing with Section 17001),
Part 11 (commencing with Section 23001), or this part (or the
liability at law or in equity of any transferee in respect of that
liability); shall have the power to require by demand, that an entity
of any kind including, but not limited to, employers, persons, or
financial institutions provide information or make available for
examination or copying at a specified time and place, or both, any
book, papers, or other data which may be relevant to that purpose.
Any demand to a financial institution shall comply with the
California Right to Financial Privacy Act set forth in Chapter 20
(commencing with Section 7460) of Division 7 of Title 1 of the
Government Code.  Information which may be required upon demand
includes, but is not limited to, any of the following:
   (1) Addresses and telephone numbers of persons designated by the
Franchise Tax Board.
   (2) Information contained on Federal Form W-2 (Wage and Tax
Statement), Federal Form W-4 (Employee's Withholding Allowance
Certificate), or State Form DE-4 (Employee's Withholding Allowance
Certificate).
   (b) The Franchise Tax Board may require the attendance of the
taxpayer or of any other person having knowledge in the premises and
may take testimony and require material proof for its information and
administer oaths to carry out this part.
   (c) The Franchise Tax Board may issue subpoenas or subpoenas duces
tecum, which subpoenas must be signed by any member of the Franchise
Tax Board and may be served on any person for any purpose.
   (d) Obedience to subpoenas or subpoenas duces tecum issued in
accordance with this section may be enforced by application to the
superior court as set forth in Article 2 (commencing with Section
11180) of Chapter 2 of Part 1 of Division 3 of Title 2 of the
Government Code.
   (e) When examining a return, the Franchise Tax Board shall not use
financial status or economic reality examination techniques to
determine the existence of unreported income of any taxpayer unless
the Franchise Tax Board has a reasonable indication that there is a
likelihood of unreported income.
   (f) The amendments made by the act adding this subdivision shall
apply to any examination beginning on or after the effective date of
this act.
  SEC. 27.  Section 19504.5 is added to the Revenue and Taxation
Code, to read:
   19504.5.  (a) (1) Except as provided in subdivision (b), no
subpoena may be issued under this part and the Franchise Tax Board
may not begin any action under Article 2 (commencing with Section
1180) of Chapter 2 of Part 1 of Division 3 of Title 2 of the
Government Code to enforce any subpoena to produce or analyze any
tax-related computer software source code.
   (2) Any software and related materials that are provided to the
Franchise Tax Board under this part shall be subject to the
safeguards under subdivision (c).
   (b) (1) Paragraph (1) of subdivision (a) shall not apply to any
portion, item, or component of the tax-related computer software
source code if all of the following apply:
   (A) The Franchise Tax Board is unable to otherwise reasonably
ascertain the correctness of any item on a return from either of the
following:
   (i) The taxpayer's books, papers, records, or other data.
   (ii) The computer software executable code (and any modifications
thereof) to which the source code relates and any associated data
which, when executed, produces the output to ascertain the
correctness of the item.
   (B) The Franchise Tax Board identifies with reasonable specificity
the portion, item, or component of the source code needed to verify
the correctness of the item on the return.
   (C) The Franchise Tax Board determines that the need for the
portion, item, or component of the source code with respect to the
item outweighs the risks of unauthorized disclosure of trade secrets.

   (2) Paragraph (1) of subdivision (a) shall not apply to any of the
following:
   (A) Any inquiry into any offense connected with the administration
or enforcement of this part, Part 10 (commencing with Section
17001), Part 10.7 (commencing with Section 21001), or Part 11
(commencing with Section 23001).
   (B) Any tax-related computer software source code acquired or
developed by the taxpayer or related person primarily for internal
use by the taxpayer or that person rather than for commercial
distribution.
   (C) Any communications between the owner of the tax-related
computer software source code and the taxpayer or related persons.
   (D) Any tax-related computer software source code which is
required to be provided or made available pursuant to any other
provision of this part, Part 10 (commencing with Section 17001), Part
10.7 (commencing with Section 21001), or Part 11 (commencing with
Section 23001).
   (3) For purposes of paragraph (1), the Franchise Tax Board shall
be treated as meeting the requirements of subparagraphs (A) and (B)
of that paragraph if all of the following apply:
   (A) The Franchise Tax Board determines that it is not feasible to
determine the correctness of an item without access to the computer
software executable code and associated data described in clause (ii)
of subparagraph (A) of paragraph (1).
   (B) The Franchise Tax Board makes a formal request to the taxpayer
for the code and data and to the owner of the computer software
source code for the executable code.
   (C) The code and data are not provided within 180 days of that
request.
   (4) In any proceeding brought under Article 2 (commencing with
Section 1180) of Chapter 2 of Part 1 of Division 3 of Title 2 of the
Government Code to enforce a subpoena issued under the authority of
this subdivision, the court shall, at the request of any party, hold
a hearing to determine whether the applicable requirements of this
section have been met.
   (c) (1) In any court proceeding to enforce a subpoena for any
portion of software, the court may receive evidence and issue any
order necessary to prevent the disclosure of trade secrets or other
confidential information with respect to that software, including
requiring that any information be placed under seal to be opened only
as directed by the court.
   (2) Notwithstanding any other provision of this section, and in
addition to any protections ordered pursuant to paragraph (1), in the
case of software that comes into the possession or control of the
Franchise Tax Board in the course of any examination with respect to
any taxpayer, all of the following shall apply:
   (A) The software may be used only in connection with the
examination of that taxpayer's return, any protest or appeal by the
taxpayer, any judicial proceeding and any appeals therefrom, or any
inquiry into any offense connected with the administration or
enforcement of this part, Part 10 (commencing with Section 17001),
Part 10.7 (commencing with Section 21001), or Part 11 (commencing
with Section 23001).
   (B) The Franchise Tax Board shall provide, in advance, to the
taxpayer and the owner of the software a written list of the names of
all individuals who will analyze or otherwise have access to the
software.
   (C) (i) The software shall be maintained in a secure area or
place, and in the case of computer software source code, shall not be
removed from the owner's place of business unless the owner permits,
or a court orders, that removal.
   (ii) For purposes of clause (i), the owner shall make available
any necessary equipment or materials for analysis of computer
software source code required to be conducted on the owner's
premises.
   (D) The software may not be copied except as necessary to perform
an analysis, and the Franchise Tax Board shall number all copies made
and certify in writing that no other copies have been or will be
made.
   (E) At the end of the period during which the software may be used
under subparagraph (A), both of the following apply:
   (i) The software and all copies thereof shall be returned to the
person from whom they were obtained and any copies thereof made under
subparagraph (D) on the hard drive of a machine or other mass
storage device shall be permanently deleted.
   (ii) The Franchise Tax Board shall obtain from any person who
analyzes or otherwise had access to that software a written
certification under penalty of perjury that all copies and related
materials have been returned and that no copies were made of them.
   (F) The software may not be decompiled or disassembled.
   (G) (i) The Franchise Tax Board shall provide to the taxpayer and
the owner of any interest in the software, as the case may be, a
written agreement, between the Franchise Tax Board and any person who
is not an officer or employee of the State of California and who
will analyze or otherwise have access to that software, which
provides that the person agrees not to do either of the following:
   (I) Disclose the software to any person other than persons to whom
the information could be disclosed for tax administration purposes
under Section 19542.
   (II) Participate for two years in the development of software
which is intended for a similar purpose as the software examined.
   (ii) The owner of any interest in the software shall be considered
a party to any agreement described in clause (i).
   (H) The software shall be treated as return information for
purposes of Section 19542.
   (d) For purposes of this section:
   (1) "Software" includes computer software source code and computer
software executable code.
   (2) "Computer software source code" means all of the following:
   (A) The code written by a programmer using a programming language
which is comprehensible to appropriately trained persons and is not
capable of directly being used to give instructions to a computer.
   (B) Related programmers' notes, design documents, memoranda, and
similar documentation.
   (C) Related customer communications.
   (3) "Computer software executable code" means both of the
following:
   (A) Any object code, machine code, or other code readable by a
computer when loaded into its memory and used directly by the
computer to execute instructions.
   (B) Any related user manuals.
   (4) "Owner" includes, with respect to any software, the developer
of the software.
   (5) A person shall be treated as related to another person if the
persons are related persons under Section 267 or 707(b) of the
Internal Revenue Code.
   (6) "Tax-related computer software source code" means the computer
source code for any computer software program intended for
accounting, tax return preparation or compliance, or tax planning.
   (e) This section and Section 19542.3 shall not apply to any
software acquired or developed for internal use by the Franchise Tax
Board.
   (f) This section shall apply to subpoenas issued, and software
acquired, after the effective date of the act adding this section.
In the case of any software acquired on or before the effective date
of the act adding this section, the requirements of paragraph (2) of
subdivision (a) shall apply after the 90th day after the effective
date of the act adding this section.  The preceding sentence shall
not apply to the requirement under clause (ii) of subparagraph (G) of
paragraph (2) of subdivision (c).
  SEC. 28.  Section 19504.7 is added to the Revenue and Taxation
Code, to read:
   19504.7.  (a) An officer or employee of the Franchise Tax Board
may not contact any person other than the taxpayer with respect to
the determination or collection of the tax liability of the taxpayer
without providing reasonable notice in advance to the taxpayer that
contacts with persons other than the taxpayer may be made.  The
notice shall explain that a request may be made as provided in
subdivision (b).  A notice shall be valid for any third-party
contacts made during the 12 months following the date of the notice.
For any third-party contacts made after the expiration of the 12
months, an additional preliminary notice must be provided.  This
subdivision shall not apply if mail to the same address is returned
undeliverable with no forwarding address.  The notice shall not be
required if the unpaid tax for which notice would otherwise be
required under this paragraph is consolidated for collection purposes
with a preexisting unpaid tax for which notice has been given under
this paragraph with respect to that described preexisting unpaid tax
of the person.
   (b) The Franchise Tax Board shall provide, upon request from the
taxpayer, a record of persons contacted during that 12-month period
by the Franchise Tax Board with respect to the determination or
collection of the tax liability of the taxpayer.  The taxpayer's
request shall be made no later than 60 days after the 12-month period
has expired.
   (c) This section shall not apply:
   (1) To any contact which the taxpayer has authorized.
   (2) If the Franchise Tax Board determines for good cause shown
that the notice would jeopardize collection of any tax or the notice
may involve reprisal against any person.
   (3) With respect to any pending criminal investigation.
   (d) This section shall be operative for contacts made after 180
days after the effective date of the act adding this section.
  SEC. 30.  Section 19542.3 is added to the Revenue and Taxation
Code, to read:
   19542.3.  Any person who willfully divulges or makes known
software, as defined in paragraph (1) of subdivision (d) of Section
19504.5, to any person in violation of Section 19504.5 is punishable
by imprisonment in the county jail not to exceed one year, or in the
state prison not to exceed five years, at the discretion of the court
or by fine of not more than five thousand dollars ($5,000), or by
both the fines and imprisonment, at the discretion of the court,
together with the costs of investigation and prosecution.
  SEC. 31.  Section 19546.5 is added to the Revenue and Taxation
Code, to read:
   19546.5.  Any person who otherwise has or had access to any return
or return information may disclose the return or return information
to a committee appointed by the Assembly or Senate, or both, or any
member, clerk, or other officer or employee thereof, if the person
believes the return or return information may relate to possible
board misconduct, maladministration, or taxpayer abuse.
  SEC. 32.  Section 19705 of the Revenue and Taxation Code is amended
to read:
   19705.  (a) Any person who does any of the following shall be
guilty of a felony and, upon conviction, shall be fined not more than
fifty thousand dollars ($50,000) or imprisoned not more than three
years, or both, together with the costs of investigation and
prosecution:
   (1) Willfully makes and subscribes any return, statement, or other
document, that contains or is verified by a written declaration that
it is made under penalty of perjury, and he or she does not believe
to be true and correct as to every material matter.
   (2) Willfully aids or assists in, or procures, counsels, or
advises the preparation or presentation under, or in connection with
any matter arising under, the Personal Income Tax Law or the Bank and
Corporation Tax Law, of a return, affidavit, claim, or other
document, that is fraudulent or is false as to any material matter,
whether or not that falsity or fraud is with the knowledge or consent
of the person authorized or required to present that return,
affidavit, claim, or document.
   (3) Simulates or falsely or fraudulently executes or signs any
bond, permit, entry, or other document required by the provisions of
the Personal Income Tax Law or the Bank and Corporation Tax Law, or
by any regulation pursuant to that law, or procures the same to be
falsely or fraudulently executed or advises, aids in, or connives at
that execution.
   (4) Removes, deposits, or conceals, or is concerned in removing,
depositing, or concealing, any goods or commodities for or in respect
whereof any tax is or shall be imposed, or any property upon which
levy is authorized by Chapter 5 (commencing with Section 19201); or
Chapter 8 (commencing with Section 688.010) of Division 1 of, and
Chapter 5 (commencing with Section 706.010) of Division 2 of, Title 9
of the Code of Civil Procedure, with intent to evade or defeat the
assessment or collection of any tax, additions to tax, penalty, or
interest imposed by Part 10 (commencing with Section 17001), Part 11
(commencing with Section 23001), or this part.
   (5) In connection with any settlement under Section 19442, or
offer of that settlement, or in connection with any closing agreement
under Section 19441 or offer to enter into that agreement, or
compromise under Section 19443, or offer of that compromise,
willfully does any of the following:
   (A) Conceals from any officer or employee of this state any
property belonging to the estate of a taxpayer or other person liable
in respect of the tax.
   (B) Receives, withholds, destroys, mutilates, or falsifies any
book, document, or record, or makes any false statement, relating to
the estate or financial condition of the taxpayer or other person
liable in respect of the tax.
   (b) In the case of a corporation, the fifty thousand dollars
($50,000) limitation specified in subdivision (a) shall be increased
to two hundred thousand dollars ($200,000).
   (c) The fact that an individual's name is signed to a return,
statement, or other document filed, including a return, statement, or
other document filed using electronic technology pursuant to Section
18621.5, shall be prima facie evidence for all purposes that the
return, statement, or other document was actually signed by him or
her.
   (d) For purposes of this section, "person" means the taxpayer, any
member of the taxpayer's family, any corporation, agent, fiduciary,
or representative of, or any other individual or entity acting on
behalf of, the taxpayer, or any other corporation or entity owned or
controlled by the taxpayer, directly or indirectly, or which owns or
controls the taxpayer, directly or indirectly.
   (e) The changes made to this section by the act adding this
subdivision apply to offers made on or after January 1, 1999.
  SEC. 33.  Section 19717 of the Revenue and Taxation Code is amended
to read:
   19717.  (a) The prevailing party may be awarded a judgment for
reasonable litigation costs incurred, in the case of any civil
proceeding brought by or against the State of California in a court
of record of this state in connection with the
                              determination, collection, or refund of
any tax, interest, or penalty under this part.
   (b) (1) A judgment for reasonable litigation costs shall not be
awarded under subdivision (a) unless the court determines that the
prevailing party has exhausted all administrative remedies available
to that party under this part, including the filing of an appeal as
provided in Section 19324.  Any failure to agree to an extension of
the time for the assessment of any tax shall not be taken into
account for purposes of determining whether the prevailing party
meets the requirements of the preceding sentence.
   (2) An award under subdivision (a) shall be made only for
reasonable litigation costs which are allocable to the State of
California and not to any other party to the action or proceeding.
   (3) No award for reasonable litigation costs may be made under
subdivision (a) with respect to any portion of the civil proceeding
during which the prevailing party has unreasonably protracted that
proceeding.
   (c) For purposes of this section:
   (1) "Reasonable litigation costs" includes any of the following:
   (A) Reasonable court costs.
   (B) Based upon prevailing market rates for the kind or quality of
services furnished, any of the following:
   (i) The reasonable expenses of expert witnesses in connection with
the civil proceeding, except that no expert witness shall be
compensated at a rate in excess of the highest rate of compensation
for expert witnesses paid by the State of California.
   (ii) The reasonable cost of any study, analysis, engineering
report, test, or project which is found by the court to be necessary
for the preparation of the party's case.
   (iii) Reasonable fees paid or incurred for the services of
attorneys in connection with the civil proceeding, except that those
fees shall not be in excess of one hundred twenty-five dollars ($125)
per hour unless the court determines that a special factor, such as
the limited availability of qualified attorneys for the proceeding,
the difficulty of the issues presented in the case, or the local
availability of tax expertise justifies a higher rate.  In the case
of each calendar year beginning with calendar year 2001, the
Franchise Tax Board shall recompute the dollar amount referred to in
the preceding sentence.  That computation shall be made by increasing
the amount in this clause by an amount equal to the cost-of-living
adjustment determined under subdivision (h) of Section 17041.  If any
resulting dollar amount is not a multiple of ten dollars ($10), that
dollar amount shall be rounded to the nearest multiple of ten
dollars ($10).
   (iv) The court may award reasonable attorney fees under
subdivision (a) in excess of the attorney fees paid or incurred if
the fees are less than the reasonable attorneys' fees because the
attorney is representing the prevailing party for no fee or for a fee
which (taking into account all the facts and circumstances) is no
more than a nominal fee.  This clause shall apply only if the award
is paid to the attorney or the attorney's employer.
   (2) (A) "Prevailing party" means any party to any proceeding
described in subdivision (a) (other than the State of California or
any creditor of the taxpayer involved) that meets either of the
following criteria:
   (i) Has substantially prevailed with respect to the amount in
controversy.
   (ii) Has substantially prevailed with respect to the most
significant issue or set of issues presented.
   (B) (i) A party shall not be treated as the prevailing party in a
proceeding to which subdivision (a) applies if the State of
California establishes that its position in the proceeding was
substantially justified.
   (ii) For purposes of clause (i), the position of the State of
California shall be presumed not to be substantially justified if the
Franchise Tax Board did not follow its applicable published guidance
in the administrative proceeding.  This presumption may be rebutted.

   (iii) For purposes of clause (ii), the term "applicable published
guidance" means either of the following:
   (I) A regulation, legal ruling, notice, information release, or
announcement.
   (II) Any chief counsel ruling or determination letter issued to
the taxpayer.
   (iv) For purposes of clause (i), in determining whether the
position of the Franchise Tax Board was substantially justified, the
court shall take into account whether the Franchise Tax Board has
lost in any California Court of Appeal in another district on
substantially similar issues, as reflected in a decision certified
for publication.
   (C) Any determination under this paragraph as to whether a party
is a prevailing party shall be made by either of the following:
   (i) The court.
   (ii) An agreement of the parties.
   (3) The term "civil proceeding" includes a civil action.
   (d) For purposes of this section, in the case of multiple actions
which could have been joined or consolidated, or a case or cases
involving a return or returns of the same taxpayer (including joint
returns of married individuals) which could have been joined in a
single proceeding in the same court, the actions or cases shall be
treated as one civil proceeding regardless of whether the joinder or
consolidation actually occurs, unless the court in which the action
is brought determines, in its discretion, that it would be
inappropriate to treat the actions or cases as joined or consolidated
for purposes of this section.
   (e) An order granting or denying an award for reasonable
litigation costs under subdivision (a), in whole or in part, shall be
incorporated as a part of the decision or judgment in the case and
shall be subject to appeal in the same manner as the decision or
judgment.
   (f) For purposes of this section, "position of the State of
California" includes either of the following:
   (1) The position taken by the State of California in the civil
proceeding.
   (2) Any administrative action or inaction by the Franchise Tax
Board (and all subsequent administrative action or inaction) upon
which that proceeding is based.
   (g) The amendments made by the act amending this subdivision are
effective for costs incurred and services performed more than 180
days after the effective date of the act amending this subdivision.

  SEC. 34.  Section 21013 of the Revenue and Taxation Code is amended
to read:
   21013.  (a) (1) Every taxpayer is entitled to be reimbursed for
any reasonable fees and expenses related to an appeal before the
State Board of Equalization if all of the following conditions are
met:
   (A) The taxpayer files a claim for the fee and expenses with the
State Board of Equalization.
   (B) The State Board of Equalization, in its sole discretion, finds
that the action taken by the Franchise Tax Board staff was
unreasonable.
   (2) For purposes of this section:
   (A) Fees and expenses related to an appeal before the State Board
of Equalization do not include fees and expenses incurred in cases
where an appeal has been filed, but resolved before the Franchise Tax
Board's written statement of its position has been submitted to the
State Board of Equalization.
   (B) Fees may be awarded in excess of the fees paid or incurred if
the fees are less than the reasonable fees because an individual
representing the taxpayer is entitled to be reimbursed for no fee or
for a fee which, taking into account all the facts and circumstances,
is no more than a nominal fee.  This subparagraph shall apply only
if the award is paid to the individual or the individual's employer.

   (b) (1) To determine whether the Franchise Tax Board staff has
been unreasonable, the State Board of Equalization shall consider
whether the Franchise Tax Board has established that its position in
the appeal was substantially justified.
   (2) For purposes of paragraph (1), the position of the Franchise
Tax Board shall be presumed not to be substantially justified if its
staff did not follow its applicable published guidance in the appeal.
  This presumption may be rebutted.
   (3) For purposes of paragraph (2), the term "applicable published
guidance" means either of the following:
   (A) A regulation, legal ruling, notice, information release, or
announcement.
   (B) Any chief counsel ruling or determination letter issued to a
taxpayer.
   (c) The amount of reimbursed fees and expenses shall be determined
by the State Board of Equalization and shall be limited to the
following:
   (1) Fees and expenses incurred after the date of a notice of
proposed deficiency assessment or jeopardy assessment, or a denial of
a claim for refund.
   (2) If the State Board of Equalization finds that the Franchise
Tax Board staff was unreasonable with respect to certain issues but
reasonable with respect to other issues, the amount of reimbursed
fees and expenses shall be limited to those which relate to the
issues where the Franchise Tax Board staff was unreasonable.
   (d) Any proposed determination by the State Board of Equalization
pursuant to this section shall be available as a public record for at
least 10 days prior to the effective date of that determination.
   (e) The amendments made by the act amending this subdivision are
effective for fees and expenses incurred more than 180 days after the
effective date of the act amending this subdivision.
  SEC. 34.5.  Section 21013 of the Revenue and Taxation Code is
amended to read:
   21013.  (a) (1) Every taxpayer is entitled to be reimbursed for
any reasonable fees and expenses related to an appeal before the
State Board of Equalization if all of the following conditions are
met:
   (A) The taxpayer files a claim for the fee and expenses with the
State Board of Equalization.
   (B) The State Board of Equalization, in its sole discretion, finds
that the action taken by the Franchise Tax Board staff was
unreasonable.
   (2) For purposes of this section:
   (A) Fees and expenses related to an appeal before the State Board
of Equalization do not include fees and expenses incurred in cases
where an appeal has been filed, but resolved before the Franchise Tax
Board's written statement of its position has been submitted to the
State Board of Equalization.
   (B) Fees may be awarded in excess of the fees paid or incurred if
the fees are less than the reasonable fees because an individual
representing the taxpayer is entitled to be reimbursed for no fee or
for a fee which, taking into account all the facts and circumstances,
is no more than a nominal fee.  This subparagraph shall apply only
if the award is paid to the individual or the individual's employer.

   (b) (1) To determine whether the Franchise Tax Board staff has
been unreasonable, the State Board of Equalization shall consider
whether the Franchise Tax Board has established that its position in
the appeal was substantially justified.
   (2) For purposes of paragraph (1), the position of the Franchise
Tax Board shall be presumed not to be substantially justified if its
staff did not follow its applicable published guidance in the appeal.
  This presumption may be rebutted.
   (3) For purposes of paragraph (2), the term "applicable published
guidance" means either of the following:
   (A) A regulation, legal ruling, notice, information release, or
announcement.
   (B) Any chief counsel ruling or determination letter issued to a
taxpayer.
   (c) The amount of reimbursed fees and expenses shall be determined
by the State Board of Equalization and shall be limited to the
following:
   (1) Fees and expenses incurred after the date of a notice of
proposed deficiency assessment or jeopardy assessment, or a denial of
a claim for refund, including fees and expenses incurred at the
hearing specified in subdivision (e).
   (2) If the State Board of Equalization finds that the Franchise
Tax Board staff was unreasonable with respect to certain issues but
reasonable with respect to other issues, the amount of reimbursed
fees and expenses shall be limited to those which relate to the
issues where the Franchise Tax Board staff was unreasonable.
   (d) Any proposed determination by the State Board of Equalization
pursuant to this section shall be available as a public record for at
least 10 days prior to the effective date of that determination.
   (e)  Every taxpayer who files a claim for reimbursement of fees
and expenses under this section shall be granted an oral hearing
before the State Board of Equalization, unless that taxpayer has
waived the oral hearing in writing, or unless the State Board of
Equalization or the Franchise Tax Board concedes the underlying tax
appeal and agrees to the reimbursement of fees and expenses.  The
State Board of Equalization shall give the taxpayer 60 days' notice
of the time and place of the hearing.  The State Board of
Equalization may continue the hearing from time to time as may be
necessary.
   (f) (1) Except as provided in paragraph (2), the amendments made
by the act adding this subdivision are effective for fees and
expenses incurred more than 180 days after the effective date of the
act adding this subdivision.
   (2) Subdivision (e), relating to the oral hearing before the State
Board of Equalization, shall be operative for fees and expenses
related to appeals filed on or after January 1, 2000.
  SEC. 35.  Section 21016 of the Revenue and Taxation Code is amended
to read:
   21016.  (a) The board shall release any levy issued pursuant to
Part 10.2 (commencing with Section 18401) on any property in the
event of any circumstances deemed appropriate by the board,
including, but not limited to, the following:
   (1) The expense of the sale process to the state exceeds the
liability for which the levy is made.
   (2) The Taxpayers' Rights Advocate orders the release of the levy
upon his or her finding that the levy threatens the health or welfare
of the taxpayer or his or her spouse and dependents or family.
   (3) The proceeds from the sale would not result in a reasonable
reduction of the debt.
   (4) The levy was issued not in accordance with administrative
procedures.
   (5) The taxpayer has entered into an installment payment agreement
under Section 19008 to satisfy the tax liability for which the levy
was made, unless that or another agreement allows for the levy.
   (6) The release of the levy will facilitate the collection of the
tax liability or will be in the best interest of the taxpayer and the
state.
   (b) The board shall not sell any seized property until it has
first notified the taxpayer in writing of the exemptions from levy
under Chapter 4 (commencing with Section 703.010) of Title 9 of the
Code of Civil Procedure.
   (c) This section shall not apply to the seizure of any property as
a result of a jeopardy assessment authorized by Article 5
(commencing with Section 19081) of Chapter 4 of Part 10.2.
   (d) In the case of a levy on salary or wages payable to or
received by the taxpayer, in accordance with Chapter 5 (commencing
with Section 706.010) of Division 2 of Title 9 of the Code of Civil
Procedure, upon agreement with the taxpayer that the tax is not
collectible, the board shall release the levy as soon as practicable.
  This subdivision shall not apply if the debt for which the levy is
issued has been discharged from collectibility pursuant to Section
16301.6 of the Government Code, except if the debt is satisfied.
   (e) The amendments made by the act adding this subdivision are
operative for salary or wages subject to levy on or after the
effective date of the act adding this subdivision.
  SEC. 36.  The amendments made by this act to Section 17053.5 of the
Revenue and Taxation Code and the repeal of Section 19052 of the
Revenue and Taxation Code shall be operative for taxable years
beginning on or after January 1, 1998.
  SEC. 37.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
  SEC. 39.  Section 34.5 of this bill incorporates amendments to
Section 21013 of the Revenue and Taxation Code proposed by both this
bill and SB 299.  It shall only become operative if (1) both bills
are enacted and become effective on or before January 1, 2000, but
this bill becomes operative first, (2) each bill amends Section 21013
of the Revenue and Taxtation Code, and (3) this bill is enacted
after SB 299, in which case Section 21013 of the Revenue and Taxation
Code, as amended by Section 34 of this bill, shall remain operative
only until the operative date of SB 299, at which time Section 34.5
of this bill shall become operative.
  SEC. 40.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.
